The Collins Foods Ltd (ASX: CKF) share price has drifted lower on Tuesday after the KFC restaurant operator released its full-year results for FY 2018.
In afternoon trade the company's shares are down almost 2% to $5.35 but were down as much as 4.5% in early trade.
For the 12 months ending April 29, 2018, Collins Foods achieved revenue of $770.9 million and underlying net profit after tax of $38.9 million. This was a 21.7% and 13.3% increase on FY 2017's result.
The top line growth was boosted by acquisitions and expansions both at home and in Europe, but was also given a lift by same store sales growth of 1%. On a regional basis, same store sales grew 1% in Australia and 0.8% in Europe.
Australian KFC same store sales growth was hit by weakness in WA and European same store sales growth was held back by a couple of instances of store cannibalisation.
The company's Sizzler Australia and Asia delivered EBITDA of $4.8 million, which was flat on last year despite a large number of restaurant closures.
On a per share basis, Collins Foods posted underlying earnings of 33.8 cents. According to Bloomberg, the market was expecting earnings per share of 35.2 cents, making this a miss.
It declared a final fully franked dividend of 9 cents per share, bringing its full year dividend to a total of 17 cents. This equates to a yield of 3.2% based on its current share price.
Collins Foods finished the year with operating cash flow rising 23.1% (or $14 million) to $74.5 million and its debt levels have now risen by $94.1 million to $227.2 million following its acquisition spree.
Outlook.
According to CEO Graham Maxwell, the company is "focused on continuing to grow our KFC Australia business through transaction led same store sales growth and further improving the performance of our WA business building on the positive Q4 results it achieved." The company intends to add 8 new restaurants to its network.
In Europe the company intends to open 6 to 8 new restaurants across Germany and the Netherlands, taking the number of restaurants in these markets beyond 40.
This and its transformation plan which is in place in its Germany business is expected to lead to "strong growth in FY19" according to Maxwell.
Should you invest?
Based on this result and its current share price, Collins Foods' shares are now changing hands at approximately 16x earnings.
While I thought this result was a touch weak, I still see enough positives to believe that Collins Foods would be a good long-term option at this level for investors along with fellow food shares Domino's Pizza Enterprises Ltd (ASX: DMP) and Freedom Foods Group Ltd (ASX: FNP).
